FIRST
INVESTORS
GOVERNMENT
FUND, INC.
ANNUAL
REPORT
DECEMBER 31, 1996
Vertically reading from bottom to top in the center of the page the words
"FIRST INVESTORS" appear.
The following appears in a box to the left of the above language:
First Investors Logo (as described above)
NEED SERVICE?
If you have questions about your account...or would like information regarding
other products or services...please contact your representative or call our
Shareholder Services Department at...
(800) 423-4026
The following appears in a box within the above box:
Our business is...putting investors first
The following appears on the bottom lefthand side:
FIGV085
Portfolio Manager's Letter
FIRST INVESTORS GOVERNMENT FUND, INC.
Dear Investor:
The current economic expansion extended to its fifth year in 1996. The
economy grew by 3.4% during the year with the core rate of consumer price
inflation increasing 2.6%, its slowest pace since the mid-1960's. The
combination of moderate growth and low inflation provided a positive
background for the financial markets. The broad stock market averages made
new highs in 1996 while long-term interest rates moved somewhat higher
during the year. Besides the economy, the markets benefited from strong
demand for U.S. securities. Individual investors bought a record amount of
stock mutual funds, while foreign investors bought a record amount of U.S.
Treasury bonds.
Long-term U.S. Treasury bond yields rose approximately 70 basis points
(.70%) as the length of the economic expansion raised concerns of
accelerating inflation. As interest rates increased, mortgage-backed
bonds outperformed Treasury bonds as investors bought the former to take
advantage of their higher yield. Over the course of the year, tighter
spreads and mortgage-backed bonds higher yields resulted in approximately
265 basis points (2.65%) of additional total return versus U.S. Treasury
securities.
To meet the objective of current income, the Fund was generally 90%
invested in GNMA mortgage-backed bonds which offered yields anywhere from
1% to 1.5% greater than comparable maturity Treasury securities. The Fund
also responded to trends in interest rates by buying or selling Treasury
securities and adjusting the weighted average maturity and coupon of its
GNMA holdings. In particular, during the first half of the year, as the
market declined, the Fund reduced its interest rate exposure by lowering
its Treasury holdings, increasing its GNMA holdings, and decreasing the
weighted average maturity of the GNMA securities. During the second half
of 1996, as the market stabilized and then rallied, the Fund increased its
Treasury holdings, decreased its GNMA holdings, and increased the weighted
average maturity of the GNMA securities. The Fund ended the year with 80%
of its assets invested in GNMA mortgage-backed bonds, 7% in FNMA mortgage-
backed bonds, 11% in U.S. Treasury or agency notes and 2% in other assets.
During 1996, the Government Fund had a total return on a net asset value
basis of 3.5% on Class A shares. In comparison, the average return for
GNMA bond funds was 3.8% according to Lipper Analytical Services, Inc.
Class B shares returned 2.7%. In 1996, the Fund declared dividends from
net investment income of 63.8 cents per Class A share and 56.4 cents per
Class B share.
Investors who buy bond funds -- whether for income or total return --
should be aware that the value of their investment fluctuates as interest
rates change. For example, a 1% increase in yield on a ten year bond
results in roughly a 7% decrease in that bond's price. In each of the last
five years, ten year Treasury bond yields have moved more than 1%. In
addition, the value of a fund can fluctuate based on changes in the
credit quality of the bonds which it holds. Investors should be aware of
these risks and recognize that successful investing generally requires a
long-term commitment to the market.
Looking forward, the factors that benefited the markets in 1996 appear
likely to continue in 1997: moderate growth, low inflation, and strong
demand for financial assets. A significant risk to the market is that
inflation may increase due to the length of the economic expansion. This
could lead the Federal Reserve to raise interest rates, hurting both the
bond and stock markets. On the other hand, the markets may be positively
surprised by legislation from the President and Congress to eliminate the
federal budget deficit. We will continue to be alert to events that may
affect the value of your investments.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
/S/ Clark D. Wagner
Clark D. Wagner
Chief Investment Officer
and Portfolio Manager
January 31, 1997
Cumulative Performance Information
FIRST INVESTORS GOVERNMENT FUND, INC.
Comparison of change in value of $10,000 investment in the First Investors
Government Fund, Inc. (Class A shares) and the Salomon Brothers Mortgage
Index and the Salomon Brothers Government Index.
The following table is the source data for the line chart which
appears at this point in the printed document. This table is not part
of the original printed document and is shown for reference only.
The same is also true for this descriptive paragraph.
FIRST INVESTORS SALOMON SALOMON
GOVERNMENT MORTGAGE GOVERNMENT
JAN 1987 9,375 10,000 10,000
DEC 1987 9,328 10,406 10,194
DEC 1988 10,178 11,322 10,914
DEC 1989 11,402 13,038 12,483
DEC 1990 12,459 14,458 13,559
DEC 1991 14,373 16,721 15,632
DEC 1992 15,272 17,953 16,758
DEC 1993 15,881 19,217 18,548
DEC 1994 15,369 18,942 17,923
DEC 1995 17,671 22,119 21,220
DEC 1996 18,292 23,304 21,844
(INSET BOX IN CHART READS:)
As of December 31, 1996
Average Annual Total Returns*
Class A Shares N.A.V. Only S.E.C Standardized
One Year 3.51% (2.92)%
Five Years 4.87% 3.53%
Ten Years 6.91% 6.22%
S.E.C. 30-Day Yield 5.68%
Class B Shares
One Year 2.73% (1.37)%
Since Inception
(1/12/95) 8.33% 6.10%
S.E.C. 30-Day Yield 5.32%
The graph compares a $10,000 investment in the First Investors Government
Fund, Inc. (Class A shares) beginning 1/1/87 with theoretical investments
in the Salomon Brothers Mortgage Index and the Salomon Brothers Government
Index. The Salomon Brothers Mortgage Index is a market capitalization-
weighted index that consists of all agency pass-throughs and FHA and GNMA
project notes. The Salomon Brothers Government Index is a market
capitalization-weighted index that consists of debt issued by the U.S.
Treasury and U.S. Government sponsored agencies. Every issue included in
the Indices is trader-priced, and the Indices follow consistent and
realistic availability limits, including only those securities with
sufficient amounts outstanding. It is not possible to invest directly in
these Indices. In addition, the Indices do not take into account fees and
expenses. For purposes of the graph and the accompanying table, unless
otherwise indicated, it has been assumed that the maximum sales charge was
deducted from the initial $10,000 investment in the Fund and all dividends
and distributions were reinvested. Class B shares performance may be
greater than or less than that shown in the line graph above based on
differences in sales loads and fees paid by shareholders investing in the
different classes.
*Average Annual Total Return figures (for the period ended 12/31/96)
include the reinvestment of all dividends and distributions. "N.A.V.
Only" returns are calculated without sales charges. The "S.E.C.
Standardized" returns shown are based on the maximum sales charge of
6.25% for Class A shares (prior to 7/1/93 and 12/29/89, the maximum sales
charges were 6.9% and 7.25%, respectively). The Class B "S.E.C.
Standardized" returns are adjusted for the applicable deferred sales charge
(maximum of 4% in the first year). Some or all of the expenses of the Fund
were waived or assumed. If such expenses had been paid by the Fund, the
Class A shares "S.E.C. Standardized" Average Annual Total Return for One
Year, Five Years and Ten Years would have been (3.14)%, 3.32% and 6.00%,
respectively, and the S.E.C. 30-Day Yield for December 1996 would have
been 5.44%. The Class B "S.E.C. Standardized" Average Annual Total Return
for One Year and Since Inception would have been (1.60)% and 5.75%,
respectively, and the S.E.C. 30-Day Yield for December 1996 would have
been 5.06%. Results represent past performance and do not indicate future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Salomon Brothers Mortgage Index and Salomon
Brothers Government Index figures from Salomon Brothers and all other
figures from First Investors Management Company, Inc.
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS GOVERNMENT FUND, INC.
December 31, 1996
- --------------------------------------------------------------------------------------------------------------------------------
Principal
Amount Security Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED CERTIFICATES--87.3%
Federal National Mortgage Association Program--7.4%
$14,230M 7%, 5/1/2024-1/1/2026 $13,963,126
- --------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association I Program--57.1%
18,689M 7%, 4/15/2023-6/15/2024 18,389,294
26,547M 7 1/2%, 9/15/2021-4/15/2024 26,709,298
16,755M 8%, 6/15/2022-9/15/2023 17,221,752
42,101M 9%, 1/15/2016-12/15/2021 45,118,825
- --------------------------------------------------------------------------------------------------------------------------------
107,439,169
- --------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association II Program--22.8%
38,496M 7%, 8/20/2025-11/20/2026 37,556,814
2,061M 8%, 8/20/2016-10/20/2016 2,121,065
3,019M 9%, 12/20/2016 3,202,754
- --------------------------------------------------------------------------------------------------------------------------------
42,880,633
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Mortgage-Backed Certificates (cost $163,685,160) 164,282,928
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES AGENCY BONDS--5.6%
10,000M Federal National Mortgage Association, 8 1/2%, 2/1/2005 (cost $10,389,973) 10,519,700
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY NOTES--5.3%
10,000M 5 7/8%, 11/30/2001 (cost $9,876,563) 9,856,250
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--1.2%
2,300M Gannet Co., 5 1/2%, 1/8/1997 (cost $2,297,540) 2,297,540
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $186,249,236) 99.4% 186,956,418
Other Assets, Less Liabilities .6 1,137,272
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $188,093,690
================================================================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS GOVERNMENT FUND, INC.
December 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value (identified cost $186,249,236) (Note 1A) $186,956,418
Cash 311,911
Receivables:
Investment securities sold $14,114,848
Interest 1,447,382
Capital shares sold 77,412 15,639,642
-------------
Other assets 27,482
-------------
Total Assets 202,935,453
Liabilities
Payables:
Investment securities purchased 14,074,442
Capital shares redeemed 346,396
Cash portion of dividend payable January 20, 1997 173,354
Accrued expenses 129,287
Accrued advisory fee 118,284
-------------
Total Liabilities 14,841,763
-------------
Net Assets (Note 4):
Class A (16,894,127 shares outstanding) 186,695,106
Class B (126,655 shares outstanding) 1,398,584 $188,093,690
------------- ============
Net Assets Consist of:
Capital paid in $209,497,460
Undistributed net investment income 84,473
Accumulated net realized loss on investment transactions (22,195,425)
Net unrealized appreciation in value of investments 707,182
-------------
Total $188,093,690
============
Net asset value and redemption price per share--Class A $11.05
=======
Maximum offering price per share--Class A ($11.05/.9375)* $11.79
=======
Net asset value and redemption price per share--Class B $11.04
=======
* On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS GOVERNMENT FUND, INC.
Year Ended December 31, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest income $15,044,474
Expenses (Notes 1 and 3):
Advisory fee $1,988,037
Distribution plan expenses--Class A 595,671
Distribution plan expenses--Class B 11,985
Shareholder servicing costs 474,863
Custodian fees 49,548
Professional fees 42,721
Reports and notices to shareholders 40,378
Other expenses 66,557
-------------
Total expenses 3,269,760
Less: Portion of advisory fee waived (489,874)
Custodian fees paid indirectly (6,248)
-------------
Net expenses 2,773,638
-------------
Net investment income 12,270,836
Realized and Unrealized Gain (Loss) on Investments (Note 2):
Net realized loss on investments (1,232,902)
Net unrealized depreciation of investments (4,653,836)
-------------
Net loss on investments (5,886,738)
-------------
Net Increase in Net Assets Resulting from Operations $6,384,098
=============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS GOVERNMENT FUND, INC.
- ------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $12,270,836 $14,247,434
Net realized gain (loss) on investments (1,232,902) 3,588,431
Net unrealized appreciation (depreciation) of investments (4,653,836) 12,889,600
------------ ------------
Net increase in net assets resulting from operations 6,384,098 30,725,465
------------ ------------
Dividends to Shareholders from:
Net investment income--Class A (11,494,009) (14,373,435)
Net investment income--Class B (61,453) (25,685)
------------ ------------
Total dividends (11,555,462) (14,399,120)
------------ ------------
Capital Share Transactions (a)
Class A:
Proceeds from shares sold 9,616,660 11,009,028
Value of dividends reinvested 9,449,764 11,800,037
Cost of shares redeemed (44,314,807) (41,080,675)
------------ ------------
(25,248,383) (18,271,610)
------------ ------------
Class B:
Proceeds from shares sold 674,440 893,299
Value of dividends reinvested 53,224 23,146
Cost of shares redeemed (202,104) (44,249)
------------ ------------
525,560 872,196
------------ ------------
Net decrease from capital share transactions (24,722,823) (17,399,414)
------------ ------------
Net decrease in net assets (29,894,187) (1,073,069)
Net Assets
Beginning of year 217,987,877 219,060,946
------------ ------------
End of year (including undistributed net investment income of
$84,473 and $0, respectively) $188,093,690 $217,987,877
============ ============
(a) Capital shares issued and redeemed
Class A:
Sold 872,095 1,008,037
Issued for dividends reinvested 857,565 1,073,060
Redeemed (4,024,024) (3,752,419)
------------ ------------
Net decrease in Class A shares outstanding (2,294,364) (1,671,322)
============ ============
Class B:
Sold 60,779 81,380
Issued for dividends reinvested 4,837 2,080
Redeemed (18,407) (4,014)
------------ ------------
Net increase in Class B shares outstanding 47,209 79,446
============ ============
See notes to financial statements
</TABLE>
Notes to Financial Statements
FIRST INVESTORS GOVERNMENT FUND, INC.
1. Significant Accounting Policies -- The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company. The Fund's objective is to achieve a
significant level of current income which is consistent with security and
liquidity of principal.
A. Security Valuation -- U.S. Government obligations are traded primarily
in the over-the-counter markets. Such securities are valued at the mean
between the last bid and asked prices as furnished by a pricing service.
Securities for which market quotations are not readily available are valued
on a consistent basis at fair value as determined in good faith by or
under the direction of the Fund's officers in a manner specifically
authorized by the Board of Directors.
B. Federal Income Taxes -- No provision has been made for federal income
taxes on net income or capital gains since it is the policy of the Fund
to continue to comply with the special provisions of the Internal Revenue
Code applicable to investment companies, and to make sufficient distributions
of income and capital gains (in excess of any available capital loss
carryovers) to relieve it from all, or substantially all, federal income
taxes. At December 31, 1996, the Fund had capital loss carryovers of
$21,723,560 of which $21,519,052 expires in 2002 and $204,508 in 2004.
C. Distributions to Shareholders -- Dividends to shareholders from net
investment income are declared daily and paid monthly. Income dividends
and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments
for mortgage-backed securities, capital loss carryforwards and post
October losses.
D. Security Transactions and Investment Income -- Security transactions
are accounted for on the date the securities are purchased or sold. Cost
is determined, and gains and losses are based, on the identified cost
basis for both financial statement and federal income tax purposes.
Interest income and estimated expenses are accrued daily. The Fund's
custodian has provided credits in the amount of $6,248 against custodian
charges based on the uninvested cash balances of the Fund.
E. Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
2. Securities Transactions -- For the year ended December 31, 1996,
purchases and sales (including pay-downs) of securities other than
short-term U.S. Government obligations and corporate notes, aggregated
$238,445,978 and $264,025,844, respectively.
At December 31, 1996, the cost of investments for federal income tax
purposes was $186,249,236. Accumulated net unrealized appreciation on
investments was $707,182 consisting of $1,642,552 gross unrealized
appreciation and $935,370 gross unrealized depreciation.
3. Advisory Fee and Other Transactions With Affiliates -- Certain
officers and directors of the Fund are officers and directors of its
investment adviser, First Investors Management Company, Inc. ("FIMCO"),
its underwriter, First Investors Corporation ("FIC"), its transfer agent,
Administrative Data Management Corp. ("ADM") and/or First Financial
Savings Bank, S.L.A. ("FFS"), custodian of the Fund's Individual
Retirement Accounts. Officers and directors of the Fund received no
remuneration from the Fund for serving in such capacities. Their
remuneration (together with certain other expenses of the Fund) is paid
by FIMCO or FIC.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the rate of 1% on the first $200 million
of the Fund's average daily net assets, .75% on the next $300 million,
declining by .03% on each $250 million thereafter, down to .66% on
average daily net assets over $1 billion. Since July 1987, FIMCO has
voluntarily waived .25% of the fee on the first $200 million of the
Fund's average daily net assets. For the year ended December 31, 1996,
this reduction amounted to $489,874.
For the year ended December 31, 1996, FIC, as underwriter, received
$279,408 in commissions after allowing $7,092 to other dealers.
Shareholder servicing costs included $280,158 in transfer agent fees
paid to ADM, and $116,130 in custodian fees paid to FFS.
Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940 Act,
the Fund is authorized to pay FIC a fee equal to .30% of the average net
assets of the Class A shares and 1% of the average net assets of the
Class B shares on an annualized basis each year, payable monthly. The fee
consists of a distribution fee and a service fee. The service fee is paid
for the ongoing servicing of clients who are shareholders of the Fund.
4. Capital -- The Fund sells two classes of shares, Class A and Class B,
each with a public offering price that reflects different sales charges
and expense levels. Class A shares are sold with an initial sales charge
of up to 6.25% of the amount invested and together with the Class B
shares are subject to 12b-1 fees as described in Note 3. Class B shares
are sold without an initial sales charge, but are generally subject to
a contingent deferred sales charge which declines in steps from 4% to 0%
over a six-year period. Class B shares automatically convert into Class
A shares after eight years. Realized and unrealized gains or losses,
investment income and expenses (other than 12b-1 fees and certain other
class expenses) are allocated daily to each class of shares based upon
the relative proportion of net assets of each class. Of the 1,000,000,000
shares originally authorized, the Fund has designated 500,000,000 shares
as Class A and 500,000,000 shares as Class B.
<TABLE>
<CAPTION>
Financial Highlights
FIRST INVESTORS GOVERNMENT FUND, INC.
The following table sets forth the per share operating performance for a share of capital stock
outstanding, total return, ratios to average net assets and other supplemental data for each
year indicated.
- --------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------
Year Ended December 31 1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
- -----------------
Net Asset Value,
Beginning of Year $11.31 $10.50 $11.55 $11.83 $11.92 $11.08
------- ------- ------- ------- ------- -------
Income from Investment
Operations
Net investment income .68 .71 .69 .72 .76 .84
Net realized and unrealized
gain (loss) on investments (.30) .82 (1.06) (.26) (.09) .83
------- ------- ------- ------- ------- -------
Total from Investment
Operations .38 1.53 (.37) .46 .67 1.67
------- ------- ------- ------- ------- -------
Less Distributions from:
Net investment income .64 .72 .68 .74 .76 .79
Net realized gains -- -- -- -- -- .04
------- ------- ------- ------- ------- -------
Total Distributions .64 .72 .68 .74 .76 .83
------- ------- ------- ------- ------- -------
Net Asset Value,
End of Year $11.05 $11.31 $10.50 $11.55 $11.83 $11.92
======= ======= ======= ======= ======= =======
Total Return (%)+ 3.51 14.98 (3.22) 3.99 5.90 15.74
- -----------------
Ratios/Supplemental Data
- -----------------------
Net Assets,
End of Year (in millions) $187 $217 $219 $288 $306 $316
Ratio to Average
Net Assets: (%)++
Expenses 1.39 1.38 1.40 1.32 1.33 1.34
Net investment income 6.15 6.50 6.31 6.14 6.45 7.43
Ratio to Average Net
Assets Before Expenses
Waived (Note 3): (%)
Expenses 1.63 1.61 1.60 1.48 1.49 1.50
Net investment income 5.90 6.27 6.11 5.98 6.29 7.27
Portfolio Turnover Rate (%) 121 163 260 584 330 117
<CAPTION>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------
Year Ended December 31 1990 1989 1988 1987 1996 1995*
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
- -----------------
Net Asset Value,
Beginning of Year $11.01 $10.75 $10.79 $12.12 $11.31 $10.52
------- ------- ------- ------- ------- -------
Income from Investment
Operations
Net investment income .90 .98 .96 .87 .60 .63
Net realized and unrealized
gain (loss) on investments .07 .26 (.04) (1.02) (.31) .80
------- ------- ------- ------- ------- -------
Total from Investment
Operations .97 1.24 .92 (.15) .29 1.43
------- ------- ------- ------- ------- -------
Less Distributions from:
Net investment income .90 .98 .96 .87 .56 .64
Net realized gains -- -- -- .31 -- --
------- ------- ------- ------- ------- -------
Total Distributions .90 .98 .96 1.18 .56 .64
------- ------- ------- ------- ------- -------
Net Asset Value,
End of Year $11.08 $11.01 $10.75 $10.79 $11.04 $11.31
======= ======= ======= ======= ======= =======
Total Return (%)+ 9.20 12.02 8.71 (1.13) 2.73 13.94
- -----------------
Ratios/Supplemental Data
- -----------------------
Net Assets,
End of Year (in millions) $299 $237 $254 $357 $1 $1
Ratio to Average
Net Assets: (%)++
Expenses 1.28 1.01 .99 1.24 2.09 2.13(a)
Net investment income 8.24 8.91 8.69 7.79 5.44 5.75(a)
Ratio to Average Net
Assets Before Expenses
Waived (Note 3): (%)
Expenses 1.49 1.22 1.16 1.38 2.34 2.37(a)
Net investment income 8.03 8.70 8.52 7.65 5.20 5.51(a)
Portfolio Turnover Rate (%) 94 117 156 74 121 163
* For the period 1/12/95 (date shares first offered) to 12/31/95
+ Calculated without sales charge
++ Net after fees waived (Note 3)
(a) Annualized
See notes to financial statements
</TABLE>
Independent Auditor's Report
To the Shareholders and Board of Directors of
First Investors Government Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
First Investors Government Fund, Inc., including the portfolio of
investments, as of December 31, 1996, and the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and financial
highlights for each of the years presented. These financial statements
and financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.
Our procedures included confirmation of securities owned as of December
31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of First Investors Government Fund, Inc. at December 31, 1996,
and the results of its operations, changes in its net assets and
financial highlights for the years presented, in conformity with
generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1997
FIRST INVESTORS GOVERNMENT FUND, INC.
Directors
James J. Coy
Roger L. Grayson
Glenn O. Head
Kathryn S. Head
Rex R. Reed
Herbert Rubinstein
James M. Srygley
John T. Sullivan
Robert F. Wentworth
Officers
Glenn O. Head
President
Clark D. Wagner
Vice President
Concetta Durso
Vice President and Secretary
Joseph I. Benedek
Treasurer
Carol Lerner Brown
Assistant Secretary
Gregory R. Kingston
Assistant Treasurer
Mark S. Spencer
Assistant Treasurer
Shareholder Information
Investment Adviser
First Investors
Management Company, Inc.
95 Wall Street
New York, NY 10005
Underwriter
First Investors Corporation
95 Wall Street
New York, NY 10005
Custodian
The Bank of New York
48 Wall Street
New York, NY 10286
Transfer Agent
Administrative Data
Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
Auditors
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, PA 19102
It is the Fund's practice to mail only one copy of its
annual and semi-annual reports to any address at which more than one
shareholder with the same last name has indicated that mail is to be
delivered. Additional copies of the reports will be mailed if requested
by any shareholder in writing or by calling 800-423-4026. The Fund will
ensure that separate reports are sent to any shareholder who
subsequently changes his or her mailing address.
This report is authorized for distribution only to existing shareholders,
and, if given to prospective shareholders, must be accompanied or
preceded by the Fund's prospectus.
